How Do Texas Property Taxes Work on a Second Home in Austin?

No. The residence homestead exemption applies only to the property that is your principal residence, and you may claim it on one property. A second home, a vacation home, or a home your children use after school is non-homestead property and is taxed on its full appraised value. This is the largest single line-item difference between holding a second home and holding a primary residence in Texas.

No. The 10% annual limit on appraised value increases is a homestead benefit and travels with the homestead exemption. Without it, a non-homestead property's appraised value can move with the market year to year, subject only to the separate limitation described below. Over a long hold, this compounding difference matters more than the exemption amount itself.

It is a temporary cap created by Senate Bill 2 in 2023 that limits annual appraised value increases to 20% on non-homestead real property appraised under $5 million, including second homes, rentals, and small commercial property. It applies automatically rather than by application, and a property cannot carry both it and the homestead cap. It is meaningfully weaker than the 10% homestead cap but it is not nothing.

It is currently scheduled to expire December 31, 2026 unless the legislature renews it. If it lapses, non-homestead property including second homes returns to having no appraisal cap at all beginning with the 2027 tax year. Anyone underwriting a second-home purchase in Austin right now should model the years after 2026 without assuming the cap survives, and should confirm the current status with their CPA or the county appraisal district.

Usually not, and assuming it will is a common and expensive error. If the seller held a homestead exemption, that exemption comes off when they leave, and the appraised value often resets toward the sale price. Buyers who budget from the seller's prior-year tax figure can find the actual bill materially higher in year one. Estimate from the purchase price at the full rate with no exemption, then treat anything better as upside.

Almost certainly not. Section 1031 defers gain only on property held for productive use in a trade or business or for investment, and the Rev. Proc. 2008-16 safe harbor for dwellings requires at least 14 nights of fair-market rental per year for two years with personal use limited to 14 nights or 10% of rental days. A house your own children occupy on school days is personal use and fails that test. Ask a qualified intermediary and your CPA before assuming otherwise.

Interest on a qualified second residence can be deductible, but it shares the same overall limit on acquisition indebtedness as your primary residence rather than getting its own, and it only helps if you itemize. Property taxes fall under the combined state and local tax deduction limit. Whether any of this produces an actual benefit depends on your full return, which is exactly why this belongs with your CPA and not with your real estate agent.

Nearly everything. Renting converts it from a personal-use second home to a rental property, which changes the deductions available, introduces depreciation and later depreciation recapture, alters how the eventual sale is taxed, and can affect your loan's occupancy terms and your insurance. It may also run into HOA leasing restrictions. Decide before you buy rather than after, and get the conversion year planned with a CPA in advance.

Yes. Non-homestead property owners have the same right to protest appraised value with the county appraisal district, and in Travis County the deadline is typically in mid-May. Because a second home has no homestead cap and only the temporary circuit-breaker limitation, protesting is arguably more consequential here than on a primary residence. Mark the date the year you close, since the first year after a sale is often when the value moves most.

Model the mortgage at second-home pricing, the property tax at the full rate against the purchase price with no exemption, insurance quoted for a partly unoccupied home, HOA dues, utilities, and a maintenance reserve for a house nobody is living in daily. Then stress-test the years after 2026 without the circuit-breaker cap. We are happy to help assemble those numbers alongside your lender and CPA before you commit to a purchase.